Accounting for Sales
Accounting Entries for Sale of Merchandise
1. Cash sales of merchandise
Cash on hand xx
Sales xx
2. Sale of merchandise on account
Accounts Receivable xx
Sales xx
3. Sale of merchandise with a note received
Note Receivable xx
Sales xx
4. Sale of merchandise with a down payment
Cash on hand xx
Accounts Receivable xx
Sales xx
5. Returns of goods sold
If goods are sold on a cash basis, a cash refund is usually given.
The entry is:
Sales, Returns and Allowances xx
Cash on hand xx
If the goods are sold on account, the entry to record the return is:
Sales Returns and allowances xx
Accounts Receivable xx
6. Settlement or payment of account without a discount
Cash on hand xx
Account Receivable xx
7. Payment of account with a discount
Cash on hand xx
Sales Discount xx
Accounts Receivable xx
Illustrative Problem for the Sales of Merchandise
July 1 - Sold merchandise for P10,000 cash
2 - The customer returned defective merchandise worth P2,000. A cash
refund was given.
6 - Sold merchandise on account to Mrs. Burce for P9,500. Terms : 2/10, n/30
7 - Paid the freight on the above sale, P300
10 - Mrs. Burce returned defective goods. A credit memo was issued for
P1,000.
Cash on hand 8330
Sales discount 170
Accounts receivable P8500
20 - Sold an old typewriter not needed on the office anymore for P3,000.
Cash on hand 3000
Equipment 3000
Journal Entries:
June 1 - Cash on hand P10,000
Sales P10,000
3 - Sales returns and allowances 2,000
Cash on hand 2,000
20 - Cash on hand………………………………………………3,000
Equipment…………………………………………………..3,000
June 7 - Freight-out 300
Cash on hand 300
10- Sales returns and allowances 1,000
Accounts Receivable 1,000
15 - Cash on hand 8,330
Sales Discount 170
Accounts Receivable 8,500
Computation
Sales P9,500
Less-returns 1,000
Balance 8,500
Less-discount - 2% 170
Balance P8,330
Freight on sale of Merchandise
Unlike in purchases of merchandise where transportation expenses are part of the
cost sales, transportation or delivery expenses on sales of merchandise are
treated as operating expenses.
Discount on Sales
The computation of discounts on sales of merchandise is the same as in
Purchases. They differ only in the entries. Discount on purchases are credited to
purchase discount while discount on sales are debited to sales discount.
The following transactions took place during the first month of operation of Delicious Trading:
Illustrative Problem
1. 1 - Paid taxes and Business licenses, P2,000
2 - Additional investment of delivery van costing P50,000, but presently
valued at P20,000
3 - Purchased goods for cash, P20,000
4 - Additional Investment of P50,000 cash
Dec. 5 - Cash sales, P10,000
6 - Purchased merchandise on account, P10,000
7 - Sold on account merchandise to Mrs. Howe worth P8,000
Terms: 2/10, n/30
8 - A cash refund of P2,000 were given to cash customers on the 5th
9 - Received P2,000 as partial payment from Ms. Howe
10 - Paid rent, P5,000
15 - Paid salaries of P6,000
17 - Purchased additional merchandise on account from Divisoria Mart for
P15,000. Terms: 2/10, n/30
Dec. 19 - Returned defective goods to Divisoria Mart for which a credit memo
was issued for P3,000
19 - Paid our account on the 6th
25 - Paid Divisoria Mart our account in full-
28 - Cash sales, P20,000
29 - Mrs. Howe paid his account in full
Journal Entries
Dec. 1 - Cash on hand P50,000
Recio, Capital P50,000
1 Taxes and license P2,000
Cash on Hand P2,000
2 Delivery equipment P20,000
D. Recio, Capital P20,000
Dec. 5 - Cash on hand 10,000
Sales 10,000
6 - Purchases 10,000
Accounts Payable 10,000
7 - Accounts Receivable 8,000
Sales 8,000
8 - Sales returns allowances 2,000
Cash on hand 2,000
Dec. 9 - Cash on hand 2,000
Accounts Receivable 2,000
10 - Rent expense 5,000
Cash on hand 5,000
15 - Salaries expense 6,000
Cash on hand 6,000
17 - Purchases 15,000
Accounts payable 15,000
Dec. 19 - Accounts payable 3,000
Purchase returns and allowances 3,000
19 - Accounts payable 10,000
Cash on hand 10,000
25 - Accounts payable 12,000
Cash on hand 11,760
Purchase discount 240
28 - Cash on hand 20,000
Sales 20,000
29 - Cash on hand 6,000
Accounts Receivable 6,000
